ChoiceOne Financial Services, Inc. (COFS)

ChoiceOne Financial Services (COFS), headquartered in Sparta, MI, is the holding company for ChoiceOne Bank. ChoiceOne operates a 14-branch network in western Michigan (in/around Grand Rapids area).

ChoiceOne trades with a fairly limited float so the market weakness in bank stocks has not hit COFS as hard as most of its peers as shares are down ~12% since its 2018 highs. While COFS’s P/TBV valuation (143%) is a touch on the high-end for my taste, the P/E valuation (~13x) is very manageable and I think shares have entered a range that provides a good entry point to start accumulating a position in an attractive banking franchise.

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Civista Bancshares (CIVB)

Civista Bancshares (CIVB), headquartered in Sandusky, Ohio, is the holding company for Civista Bank. Civista’s operating history traces all the way back to 1884 and it currently operates 35 Branches and 3 Loan Production facilities (primarily in Ohio, but footprint extends into Indiana and Kentucky).

Recent market weakness along with a negative reaction to Q3 2018 results has dropped CIVB shares nearly 35% since the end of September. After its earnings report on November 2nd, CIVB shares underperformed the BKX Index by ~10% as shares were under pressure due to some significant one-time expense items that weighed on earnings during the quarter. CIVB closed its purchase of Indiana-based United Community Bancorp in early September, and CIVB management decided to convert United Community’s systems and operations concurrent with the merger close (most banks wait a period of 6-12 months for conversion to smooth the expenses over multiple quarters). All told, CIVB reported $8.8 million of acquisition- and integration-related expenses during Q3 2018, or $0.63 per share. On its Q3 earnings call, management indicated Q4 noninterest-expense should return to a normalized ~$15mm run rate. I believe the earnings-related selloff provides a current buyer a nice ~10% discount on top of the ~25% revaluation the market slapped on just about every other bank stock in Q4.

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LCNB Corp (LCNB)

LCNB Corp (LCNB), headquartered in Lebanon, Ohio, is the one-bank holding company for LCNB National Bank. LCNB’s roots trace all the way back to 1877 (founded as The Lebanon Citizens National Bank) and it currently operates a 33 branches in markets in or adjacent to Cincinnati, Dayton, and Columbus.

While recent market weakness has not spared many bank socks, LCNB’s share performance has been in a sustained downtrend since shares peaked after the 2016 election. While its hard to attribute the downtrend to a singular cause (the bank’s operating results support an argument that its not an earnings-related issue), there are a couple of items that could be at play. First, LCNB announced a fairly-large acquisition at the end of 2017 (Columbus First Bancorp) with a TBV earnback estimate of 4.3 years. Columbus is a new market for LCNB and that brings heightened execution risk and, typically, a bump in expense items beyond typical one-time deal charges. The one-time items have hit profitability YTD, but this is a proven management team and they should be able to normalize operational costs and begin to see deal benefits in the intermediate-term. Second, the rally in shares in late 2016 and early 2017 got ahead of itself: LCNB shares traded above 200% TBV for nearly the first half of 2017. Its hard for a bank to grow into and justify such a lofty valuation, which is another reason I think shares trended down mid-2017 to early-2018.

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First Northern Community Bancorp (FNRN)

First Northern Community Bancorp (FNRN), headquartered in Dixon, California (Solano County, near Sacramento) is the single-bank holding company for First Northern Bank. First Northern Bank was established in 1910 and currently has a 10 branch network in and around Sacramento.

The market weakness in bank stocks has not hit FNRN as hard as most of its peers as shares are down ~10% since the 2018 highs. The current valuation on shares of FNRN (14x P/E and 135% P/TBV) provides a good entry point to start accumulating a position in an attractive banking franchise.

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Eagle Financial Services, Inc. (EFSI)

Eagle Financial Services, Inc (EFSI), headquartered in Berryville, VA , is a bank holding company for the Bank of Clarke County. Bank of Clarke County currently operates 12 branch offices in Northern Virginia (west of Washington DC) and its largest market is Winchester, a city of ~28,000 residents in the Shenandoah Valley.

The weakness in bank stocks and the broader market has EFSI shares down ~20% since its 2018 highs. The current valuation on shares of EFSI (12x P/E and 125% P/TBV) provides a good entry point to start accumulating a position in an attractive banking franchise.

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Peoples Bancorp of North Carolina (PEBK)

Alright, ENBP was one for me, and here is one for the (3) readers of this burgeoning blog.

Peoples Bancorp of North Carolina (PEBK) of Newton, NC. Peoples Bank currently operates 19 banking offices, mainly northwest of Charlotte (Catawba, Alexander, Lincoln, Mecklenburg, & Iredell counties) and they are focused on growing its presence in Wake County (Raleigh MSA).

The weakness in bank stocks and the broader market has PEBK shares down ~20% since its 2018 highs. While PEBK’s P/E and P/TBV valuations have not retreated all the way back to pre-election levels, current valuation (13.7x P/E and 137% P/TBV) on PEBK shares are back at early 2017 levels and provide a good entry point to start accumulating a position in an attractive banking franchise.

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ENB Financial Corp (ENBP)

I’ll put disclaimer upfront – this name is illiquid, boring, and unlikely to fit anything but a retail position size. But I like the bank so I’m going to write it up.

ENB Financial Corp (ENBP) of Ephrata, PA. ENB operates as Ephrata National Bank, and it is a small community bank that has served SE Pennsylvania (footprint is around Lancaster, PA) since 1881. Folks, ENB is as boring and straightforward as banking gets these days. Prudent and seasoned management team with a proven track record of performance positioned to compound ROE’s at ~10% while paying a 3%+ dividend.

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